The Great Smartphone Gold Rush May Be Over

Amidst increasing redundancies and crashing stock prices, the great global smartphone gold rush may finally be over. Or is it actually? While the overall smartphone market continues to grow by leaps and bounds, two key players are reportedly still pocketing all the profits, even as most other OEMs continue to lose money. Sure, Apple and Samsung have been leading the pack for years now, but with new brands popping up every other day one would have thought that there are enough spoils to go around, but apparently not, if the financial reports of various listed companies around the world are to be believed. Only recently, HTC and Lenovo came out with their respective second quarter earnings reports, laying bare an open secret of the smartphone industry – most mass-market players are just not making enough to keep them afloat. Both companies have now announced a round of job-cuts each, with HTC making 2,000 of its workers redundant, while Lenovo will sack 3,200 people, believed to be from its mobile business group.

While the two big leaders of the industry still control around 43 percent of the market through innovation on the one hand and sheer marketing muscle on the other, comparatively newer entrants like Huawei and Xiaomi have also caught on over the years and according to a recent report from Strategy Analytics, have pretty much cornered the mid and entry-level segments in a mission-critical market like China, making them the third and fourth largest vendors worldwide respectively. In their home base of China, the two companies together account for almost one-third of the country’s highly-fragmented smartphone market. Of course, the companies have now also started concentrating on other emerging high-growth markets like India, Brazil and Indonesia in recent times, in order to offset the stagnating growth in the largest smartphone market in the world. While Samsung is said to be exploring avenues to get back its lost market share in countries like China and India, Apple is also rumored to be launching a mid-ranger either this year or the next, to target the increasingly more lucrative emerging economies.

Another interesting point to note is that even as established multinationals like Sony, LG, Lenovo and HTC are gasping for breath, smaller and newer entrants like Asus and OnePlus are increasing sales, revenues and earnings by the day by carefully and methodically carving out their own niches. These players are not just surviving in this industry, they’re thriving simply by refusing to follow the leaders and making their own paths instead. Rather than launching products in the segment dominated by Apple and Samsung, these companies are targeting an admittedly niche set of buyers who actually look at hardware specs and compare the price-performance ratio before plonking down cold, hard cash. While this does reduce margins for obvious reasons, the PC industry has shown for the better part of three decades that this is indeed a sustainable way of doing business in the long run. Also, with carriers doing away with the subsidy regime, it remains to be seen how many buyers even in the richest country in the world will be willing to pay the full $800 – $900 for premium smartphones like the Galaxy S6 Edge+ or the iPhone 6 Plus upfront especially when they realize that you can get basically the same set of features and the same levels of performance from phones costing half as much! Suddenly, catering to the $200 – $400 segment with high-specs and low-margins doesn’t seem like a bad idea anymore.